Chicago Fed Insights

Household Financial Stability in Detroit: Empowering People to Bring About Prosperity

February 8, 2021

The virtual event, “Advancing Household Financial Stability in Detroit,” which was held on February 2, is the latest in a series of Project Hometown events sponsored by the Chicago Fed. These events help to identify ways to meet the challenges facing our communities as a result of the Covid-19 pandemic and to create lasting solutions for equitable recovery and growth. On November 18, 2020, the Chicago Fed hosted a Detroit Community Forum to address ways to build a more equitable and strong future for the city, while this latest event focused specifically on ways to help strengthen its households’ financial capabilities.

Amy Bickers, assistant vice president of public affairs at the Chicago Fed, moderated the event and explained that Detroit continues to face the dual challenges of the Covid-19 pandemic and a recession, which is taking “a heavy toll on the livelihoods of many people in the city.” “Detroit’s struggles are also rooted in its history of racial inequality,” she said, “which has made it extraordinarily difficult for generations of the city’s Black residents to thrive.” The pandemic is affecting the least-advantaged community members disproportionately, she added, and many of the newly unemployed lack savings to “cushion the blow.”

The United Way of Southeastern Michigan’s president and CEO, Darienne Hudson, explained that while the Covid-19 pandemic has exacerbated financial difficulties, the challenges facing many Michiganders were in existence long before the pandemic started. Her organization uses the Asset Limited, Income Constrained, Employed (ALICE) measure, originally developed by Rutgers University in 2010, to identify the minimum household budget required to meet basic needs—including food, utilities, transportation, childcare, and health care. Under ALICE, the minimum annual income required to meet basic needs in Southeastern Michigan is $24,000 for an individual (in contrast, the federal poverty level is $12,000), and for a family of four, the Alice threshold is $74,000, she said. Hudson also reported that 43% of all Michigan families would qualify as ALICE, while that figure is 60% among Black households in the state and 74% among Detroit residents. “These are our neighbors, these are our families,” stressed Hudson. The fastest growing segment qualifying as ALICE are millennials and white seniors, she noted, yet “the most pervasive indicator is race.” Hudson discussed some of the financial barriers facing Michigan residents—61% of all jobs pay $20 per hour or less, and around 33% of families have annual incomes under $30,000. To make ends meet, many people have to work multiple jobs, she said, and furthermore, consumer bankruptcy cases in Detroit are way above average.

Kristen Holt, president and CEO of GreenPath Financial Wellness, explained that this 60-year-old nonprofit organization helps people find solutions to their financial problems, and she expressed that they are “committed to the financial well-being of Detroit.” While her organization is national in scope, their headquarters is in Detroit. She explained that Detroit ranks in the bottom five in median credit scores nationally, and that credit problems, along with a lack of savings are “huge barriers to improving financial resiliency.” She also noted that the financial situation for many in Detroit is worse since the pandemic started in terms of low and unstable incomes, barriers to savings, and high debt levels. The GreenPath organization provides financial advice and access to a wealth of practical resources and information on current programs, such as a guide to receiving federal stimulus payments. Holt announced that one local source of support is their Detroit Voices Project, which allows her team to hear directly from the community, with the goal of helping Detroit’s residents “to better navigate this challenging time.” Holt added “our commitment to inclusion, diversity, equity, and access means that we can't take a one-size-fits-all approach to our work. We have to seek to understand and embrace the differences and adapt and improve our programs and services to reach more equitable outcomes for the people of Detroit.”

Kim Trent, deputy director for prosperity at the Michigan Department of Labor and Economic Opportunity, said that her role is to empower people to bring about prosperity. She explained that in Michigan, and in Detroit specifically, there are “disparities that exist and have always existed” in terms of wealth and health. She acknowledged that there is no single solution to eradicate poverty, but their Poverty Task Force (established in December 2019) is addressing this complex issue, and its recommendations will be made public this month. Various programs are underway in her department, including the Safe and Secure program to address people’s basic needs, and Strong Beginnings, which gives mothers better access to the workforce by providing government- and employer-financed childcare subsidies. Trent feels passionate that education is the most effective anti-poverty measure. Today, 46% of Michiganders have received post-secondary education and her department’s goal is to reach 60% by 2030. Other programs under her purview include criminal justice reform, addressing behavioral health needs, a children’s savings account program, as well as integrated programs to address the digital divide, which Trent said is “absolutely critical.”

With respect to the barriers people are facing, Holt explained that many people she talks to are stressed—often to the point of being frozen and unable to take concrete actions to move forward to improve their financial situation. She said that her office is surprisingly quiet considering the need for help is so great. She attributes this to the widespread “paralysis.” She is encouraging people to call GreenPath so that they can be of service in providing “concrete steps to take control back in an uncontrollable situation.” Hudson said that the top reasons people are calling her United Way office are to get food and help with housing, to find out about the Covid-19 vaccine, and to get help to cover utility bills. People are frustrated with the process of getting help to cover their power and heating bills, she said, because the assistance can be cumbersome to access and can take up to four weeks to process. In response, Hudson said that they are working with their partners to “better integrate these services.”

Bickers asked the panelists to share examples of successful cooperation, Trent said, “one of our major goals is working collaboratively.” She mentioned, for example, that they have a cooperative effort underway with the payday lending industry, whereby her department has made arrangements for information on food and housing assistance as well as eviction diversion opportunities to be made available to people applying for loans. Many people seeking such loans have not faced financial distress before, she said, and her department wants to make sure people are aware of these services. They are also working with the Department of Corrections to ensure that everyone leaving prison receives an ID, which Trent said, “makes a huge difference when entering the workforce.” Holt explained that they are partnering with many credit unions, including one in Detroit, “to not only get the word out about resources, but to look at programs and products that might be put in place that would be more accessible to communities of color.” Hudson added that their Covid-19 relief fundraising efforts have reached $37 million, and that her office has given out 1,000 grants to provide childcare for the families of frontline workers, to fund food pantries and homeless shelters, and to provide micro loans. Hudson added that by leveraging partnerships, they are also working to increase the number of Detroiters who are banked by improving lending practices and financial coaching.

On the topic of racial equity, Trent said that the middle class overall in Detroit is growing but not the Black middle class. Furthermore, “homeownership has stalled,” and while not everyone will be a homeowner, homeownership is very important for financial health, she said. Trent also explained that the work of the Poverty Task Force has been undertaken with a “racial equity lens,” and their goal is to dismantle policies that have “prevented particularly people of color in the state from thriving.” Holt also spoke of the problem of housing inequity in Detroit, stating that Black homeownership “is such an important part of building assets.” She explained that her organization has a new “A1” tool to improve credit, as well as a program in place in partnership with Freddie Mac to provide down payment help and coaching. Hudson added that “Covid has blown the cover off racial equality,” and “there is more acceptance and drive for change.”

Finally, Bickers asked the panelists to share what brings them hope. Trent said she is inspired by “how much goodwill there is,” that people are now paying attention to the poverty problem, and that it has now become “obvious that what we are doing is not enough.” Holt is optimistic because their clients are able to access financial wellness programs and benefits and become unstuck and move forward. Hudson is encouraged by their partnerships, including national partnerships, and added that, as we look into the future, “we want to make sure we are moving to a better state where we become more resilient and that our families are able to buffer themselves from this type of hardship.”

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.


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